Output, stock volatility, and political uncertainty in a natural experiment: Germany, 1880-1940

Article Abstract:

Why does stock volatility increase when output declines? The theory of investment under uncertainty implies that political uncertainty may simultaneously increase volatility and reduce output. Though cause and effect are typically hard to separate, the transition from Imperial to Weimar Germany offers a natural experiment because major political events left clear traces on stock prices. Current and past increases in volatility are associated with output declines, consistent with U.S. experience. However, political events are more clearly the source of volatility, and the results support the view that the relationship between volatility and output reflects the joint effects of political factors. (Reprinted by permission of the publisher.)

Securities and Commodity Exchanges, Security and commodity exchanges, Securities Exchanges, Economic aspects, Germany, Stock-exchange, Stock exchanges, Exchanges, Political aspects, Political risk

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The determinants of stock price exposure: financial engineering and the gold mining industry

Article Abstract:

This paper studies the exposure of North American gold mining firms to changes in the price of gold. The average mining stock moves 2 percent for each 1 percent change in gold prices, but exposures vary considerably over time and across firms. As predicted by valuation models, gold firm exposures are significantly negatively related to the firm's hedging and diversification activities and to gold prices and gold return volatility, and are positively related to firm leverage. Simple discounted cash flow models produce useful exposure predictions but they systematically overestimate exposures, possibly due to their failure to reflect managerial flexibility. (Reprinted by permission of the publisher.)

Primary nonferrous metals, not elsewhere classified, Primary Smelting and Refining of Nonferrous Metal (except Copper and Aluminum), Gold Mines, Gold Ore Mining, Gold ores, Gold, Mining industry, Gold industry, Gold mining, Precious metal products

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